In a recent update on the financial environment in Thailand, data from the National Credit Bureau, as cited by the economic council, revealed increasing debt accumulation among the Thai population. As it stood at the close of the first quarter, there were over 83.1 million accounts stained with debts.
A striking aspect of this debt is that only one third of all Non-Performing Loans (NPLs) originate from commercial banks, accounting for just 2.6% of the total household debts, as noted by Vorawan Plikamin, the NESDC Deputy Secretary General. The remaining majority of debts originate from non-banking financial institutions, raising concerns about the financial habits of the Thai demographic.
Youth workers under 30, along with the senior demographic between 50-59 years old have caught particular attention, as their contributions to NPLs experienced the largest increase: a concerning 4.1% rise year on year. Vorawan expressed particular concerns over Generation Y (ages 18-32) who seem predisposed towards splurging on high-end products, lacking considerations for long-term financing.
Equally disconcerting is the increased NPL rates among seniors, surging an average of 10.2% per annum over the last three years (2020-2022). This segment’s propensity isn’t driven by luxury spending, but rather dwindling income capacity and difficulty meeting debt repayment obligations.
The NESDC highlights that auto loans hold the lion’s share of NPLs as of Q1, ballooning by 30.3% YoY, setting a 14-quarter record. This increase indicates a rising threat of vehicle repossession risk, especially as a noteworthy number of buyers (primarily those under 30) falter on their debt repayments. According to estimates, around 95,000 vehicles lay on the brink of repossession.
The economic council advocates for a few proactive measures to keep spiraling household NPLs in check. The Bank of Thailand and relevant authorities are urged to maintain strict oversight of financial institutions’ loan processes, ensuring adherence to relevant regulations and promoting responsible financial conduct.
The council also recommends offering a fee-waiver for National Credit Bureau membership applications. This move could incentivize more loan providers to join, thereby fostering a more accurate understanding of Thai’s household debts. Additionally, the implementation of more comprehensive financial literacy programs aimed at all ages can prove helpful. These programs should cover pivotal financial management aspects, such as investment, savings, and financial planning.
Apart from debt issues, the Council’s report also highlighted an improving employment scene in Thailand during the Q2 of 2023. Employee registrations rose by 1.7% YoY, translating to about 39.7 million individuals gaining employment. Meanwhile, the average monthly income among Thais stood at 14,032 baht, and the unemployment rate slipped from 1.37% the previous year to 1.06%. Despite this positive development, around 430,000 Thais found themselves jobless during the Q2 of 2023.
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